Judge rules funds for care of cemeteries cannot be used to settle debts

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MILWAUKEE (CNS) — More than $50 million held in trust for the perpetual care of Milwaukee archdiocesan cemeteries cannot be used to settle bankruptcy debts, a federal judge has ruled.

In ruling that the Religious Freedom Restoration Act and the First Amendment prevent the appropriation of cemetery trust funds, U.S. District Court Judge Rudolph Randa in Milwaukee reversed a decision by U.S. Bankruptcy Judge Susan V. Kelley, and sent the matter back to her courtroom “for further proceedings consistent with this opinion.”

At issue is a portion of the money received from cemetery lot and mausoleum sales placed into trust for the perpetual care of cemetery sites covering approximately 1,000 acres of land in which more than 500,000 individuals are interred.

In his July 29 opinion, Randa noted that the archdiocese established its first cemeteries in the mid-1800s and church law “required, among other things, that Catholic cemeteries be maintained in a manner befitting their sacred purpose with money set aside to provide the necessary maintenance and care.”

Randa said the archdiocese’s creditors, primarily clerical abuse victims represented by the Official Committee of Unsecured Creditors, “cannot access the funds therein without violating the (RFRA) and the Free Exercise clause of the First Amendment.”

His opinion included Milwaukee Archbishop Jerome E. Listecki’s explanation that “the care and maintenance of Catholic cemeteries, cemetery property and the remains of those interred is a fundamental exercise of the Catholic faith.”

Randa continued, “Thus if the trust’s funds are converted into the bankruptcy estate, there will be no funds, or at best, insufficient funds for the perpetual care of the Milwaukee Catholic Cemeteries. Moreover, Archbishop Listecki would be forced to choose between obedience to church doctrine and obedience to a civil authority.”

He also said “removing some or all of these funds from the trust and placing them in the bankruptcy estate would undoubtedly put ‘substantial pressure’ on Archbishop Listecki to ‘modify (his) behavior and ‘violate (his) beliefs.'”

Jerry Topczewski, the archbishop’s chief of staff, was pleased with the ruling.

In an interview with the Catholic Herald, which serves the Catholic community in southeastern Wisconsin, he said: “We’ve maintained all along the Cemetery Perpetual Care Trust is separate from the archdiocese and the money in the trust came from the people who purchased plots and crypts and graves and has always been segregated and used for that intended purpose which is perpetual care of the cemeteries.”

He added, “It’s a shame that it cost so much money to prove that point in a courtroom.”

Randa, in the opinion, predicted “resolution of the issues presented on appeal will materially advance the termination of this litigation as the bankruptcy court stayed the entire adversary proceeding pending the court’s decision on appeal.”

“It cannot be denied that this court’s decision, or a further ruling on appeal from this court’s decision, will shape the course of future proceedings in bankruptcy,” he said.

Calling the ruling “stunning and dangerous,” SNAP Wisconsin, the Survivors Network of those Abused by Priests, said in a media release that Randa’s decision allows private and unregulated organizations working with children “to continue to evade responsibility, transparency and accountability for criminal acts and cover ups. If Randa’s decision is not overturned, it could seriously set back the painful path of reform and place countless children at risk.”

In weeks leading up to Randa’s decision, victim support groups criticized Cardinal Timothy M. Dolan’s establishment of the cemetery trust in 2007. They suggested the trust was established to shield archdiocesan funds from victim/survivors in possible pending litigation.

Randa addressed this concern in his opinion, saying, “In 2007, the Cemetery Trust was formed under Wisconsin law by then-Archbishop Dolan. The funds that comprise the trust’s principal took nearly a century to accumulate and include approximately $55 million that had been held, separately for that period, for the perpetual care of the Milwaukee Catholic Cemeteries even prior to being transferred to the trust in or around March 2008. …. The archdiocese receives quarterly distributions from the trust to cover the costs for providing for the perpetual care of the Milwaukee Catholic Cemeteries.”

The Milwaukee Journal Sentinel reported Aug. 3 that in a highly unusual move late Aug. 2, lawyers representing the creditors filed a motion asking Kelley to compel the release of any records showing whether Randa and his wife, Melinda, have purchased plots or crypts in any of the archdiocesan cemeteries, to determine whether Randa has a conflict of interest that should have been disclosed.

Commenting on that report, Topczewski said, “Judge Randa made earlier rulings that one might argue went against the archdiocese. In this case, if there were concerns about conflict of interest, they could have been raised months and months ago, instead of only after a decision was made in the cemetery trust proceedings.”

Since the Archdiocese of Milwaukee filed for Chapter 11 reorganization of its financial affairs under the U.S. Bankruptcy Code Jan. 4, 2011, legal sparring has focused, in part, on which archdiocesan funds should be made available to compensate the 575 creditors in the bankruptcy case.

Creditors unsuccessfully argued that assets of the archdiocese’s more than 200 individual parishes should be made available for potential settlements. A Dec. 7, 2012, ruling by Kelley denied an Oct. 25 motion by the creditors’ committee in which it maintained parishes were “alter egos” of the archdiocese, and in which it sought a “substantive consolidation of the parishes and the debtor (archdiocese).”

Three days later, she ruled that $35 million in parish investment funds returned to the parishes and other Catholic entities from the Parish Deposit Fund, which was closed in June 2005, never belonged to the archdiocese. At the time the fund was closed, parishes were given the option of having their funds returned or placed in a newly established Southeastern Wisconsin Catholic Parishes Investment Management Trust.

The archdiocese and two victims have jointly filed a lawsuit related to Chapter 11 before Randa asking whether the archdiocese can tap into insurance policies to pay sex abuse victims.

While creditors have brought up the Faith in Our Future fund, a $105 million capital campaign launched by then-Archbishop Dolan, as another pool from which to draw settlements, the archdiocese has steadfastly maintained that those funds are not considered archdiocesan resources.

According to a statement on the Faith in Our Future website, www.faithinourfuture.org, the fund “is a separate 501(c)(3) charitable trust created to support the important mission of Catholic education and faith formation. All contributions to the Faith in Our Future Trust are to be used only for these initiatives.”

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Layman Roman is managing editor of the Catholic Herald, a publication serving the Catholic community in southeastern Wisconsin.

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